India - Future Warehouse of IT in the World

Abstract

India has the world's second largest population and one of the fastest growing economies in the
world. India has a promising future, given the unprecedented growth in economy and its

clout in the global issues. India is now riding on the wave of a gigantic boom in computer-driven
new economy. Many developed countries of the world are seeking the huge pool of English-
speaking, talented software professionals in India. As the world is transforming towards
knowledge society, India too is moving proportionately, competing with the world. The increase of
Internet users and the advancement of information and communication technology in India has
boasted the development towards e-commerce in global economic society. In IT sector, India is
booming as a super-power. In the last few years, India has made rapid strides in the IT sector,
especially in the software services and IT-enabled services. In this paper, we analyze the picture
of IT industry in the very near future in India and contribution of India in world's Information
Technology Sector.

Introduction

From the 1950s, IBM had a virtual monopoly of computers in India. The 360 series release of
1960s was the major work-house of the large organizations. They even maintained a chain of
programmers who could write down softwares for their machines. However, in 1978, when
George Fernandes, in the Ministry of Industries at that time, commanded IBM to take local share-
holders into its subsidiary, the company refused strictly and went back after winding up all its
operations in India. Its ex-employees then set-up Computer Maintenance Corporation, with the
primary object of maintaining IBM computers.

During the period of 1995-2000, the Indian IT industry had recorded a C.A.G.R. (Compounded
Annual Growth Rate) of more than 42.4 percent, which is almost double the growth rate of IT
industries in many of the developed countries. Foreign companies, particularly American
companies, have played a vital role in making India an emerging IT super-power in the world.
These MNCs account for nearly 22 percent of Indian software exports. According to the latest
NASSCOM estimates, in 2001-02, multi-national infotech companies exported software worth Rs.
6,500 Crore from India. Country's total software export was pegged at Rs. 29,400 Crore. In terms
of investment and growth, U.S. companies like Cognizant Technologies (largest export revenue
earning MNC), IBM, Oracle, GE, Cisco, Compaq, Intel, amongst others, led the MNCs in the
Information Technology sector. Nine out of top-20 Indian IT firms are from United States. These
account for over 37 percent of the turnover of the top-20 firms operating in India. Despite their
significant contribution to the IT sector, these companies have to face a number of procedural
and operational problems in India.

However, the volume of e-commerce in India is far below the levels achieved in USA, which was
about 1 percent of the total GDP in 1999. Further, the expected volume of e-commerce in India in
2001 (US $ 255.3 Million) is also below the levels expected to be achieved, which in comparison
to Australia (US $ 3 Billion), China (US $ 586 Million), South Korea (US $ 876 Million) and Hong
Kong (US $ 685 Million), is quite less.

Time has changed the way businesses are carried out. What was supposed to be known to few
and limited to the home-towns, appears to be an ancient methodology of carrying out the work.
The present day brands work on world-wide scale, that is they are successful in not just one

particular region but have deepened their roots in all the corners of the globe that you can think
of.

Information Technology is what constitutes the most important sector in the present day trend of
carrying out business. It is because you can not be present everywhere to monitor the work, but
with networking and communications, you can always stay in contact with the other business
sites of yours.

ICT Approaches of India

A spate of reforms post-1991 economic crisis have given impetus to the Indian economy,
particularly to the ICT sector. As part of the reform agenda, the Indian Government has taken
major steps to promote ICT including the creation in 1988 of a World Market Policy, with a focus
on software development for export; tele-communications policy reform; privatization of the
national long-distance and mobile phone markets; and development of a more comprehensive
approach to ICT. Although India's success is commanding increasing attention and investment, it
has yet to result in the distribution of social and economic benefits across a broader base of the
population. Challenges - including the perception of an unfavorable regulatory climate, an
overloaded judicial system, poor infrastructure and costly access, and limited use of ICT - remain.
The emerging shift in government strategy, toward knowledge-intensive services, has created a
climate more conducive to addressing enterprise, domestic infrastructure, education, and the use
of ICT to meet development needs.

 Policy: India's focus on self-reliant industrialization in the 1970s and 1980s has been replaced
with reforms aimed at positioning India in the world economy: the foreign direct investment
process has been streamlined, new sectors have been opened up to foreign direct investment
and ownership, and the government has exempted the ICT industry from corporate income tax for
five years. These reforms have helped India to become increasingly integrated into the global
economy through growth in the export of softwares and skill-intensive software services, such as
call-centers.

In 1986, the Indian government announced a new software policy designed to serve as a catalyst
for the software industry. This was followed in 1988 with the World Market Policy and the
establishment of the Software Technology Parks of India (STP) scheme.

As a result, the Indian software industry grew from a mere US $ 150 Million in 1991-1992 to a
staggering US $ 5.7 Billion (including over US $ 4 Billion worth of software exports) in 1999-2000
representing an annual growth rate of over 50 percent.

The establishment of the Telecommunications Regulatory Authority of India (TRAI) was a key
step towards effective implementation of telecommunications reforms. In 1992, the mobile
phone market was opened up to private operators; in 1994, the fixed services market followed;
and finally in 1999, national long distance operations were opened to private competition. Prior to
these reforms, the Department of Telecommunications had been the sole provider of
telecommunication services.

In addition, to attract foreign direct investment, the government permitted foreign equity of up to
100 percent and duty-free import on all inputs. Government-created technology parks also offered
professional labor services to clients, a cost-effective program for India since ICT labour is so
inexpensive by global standards.
 Infrastructure: Teledensity in India has reached 3.5 percent of the population. Approximately
1 percent of house-holds have fixed-line connections, compared to 10 percent in China. The
mobile sector has approximately 3 million users, growing at 100 percent per annum, and is
expected to outstrip the fixed-line market in the near future. The number of Internet accounts is
around 1.5 million, growing at 50 percent per annum. India also has very high penetration rates of
terrestrial TV, cable and radio. Voice and data wireless solutions, for both domestic and export
markets, are increasingly produced and used locally.

Access to telephones in Indian villages has improved in the last five to six years through the
introduction of the Public Call Office (PCO) run by local shopkeepers. More than 60 percent of the
villages in India have at least one phone. This also includes over 800,000 Village Public
Telephones (VPTs). Worldtel is undertaking a pilot in four states to secure financing to upgrade
the Village Public Telephones so they will soon be Internet-accessible.

In some urban locations, India's Software Technology Parks (STPs) provide infrastructure,
buildings, electricity, telecommunication facilities and high-speed satellite links to facilitate export
processing of software.

India also has a number of progressive computerized networks in place, including a Stock
Exchange, the Indian Railways Passenger Reservation System, and the National Informatics
Centre Network (NICNET), which connects government agencies at the central, state and district
levels.

 Enterprise: India's well-established framework for protecting intellectual property rights has
been an important inducement to business investment: well-known international trademarks have
been protected by Indian laws, even when they were not registered in India. In 1999, major
legislation was passed to protect intellectual property rights in harmony with international
practices and in compliance with India's obligations under TRIPS.

Much of the initial domestic demand stimulus for ICT and ICT services industries in India has
come from government: 28 percent of total IT spending to date can be attributed to government
and public sector expenditure. Major areas of government expenditure include: financial

services, taxation, customs, telecommunications, education, defense and public infrastructure.

As a result of the growth in ICT use in India, the ICT industry itself has also increased its
domestic economic activity, for example, a number of ICT companies have developed accounting
and word processing packages in Indian languages. The potential impact of this growth on the
domestic economy is much broader than developing software for export only.

 Human Capacity: In spite of relatively low literacy rates among the general population, India
has several key advantages in human capital: a large English-speaking population and world-
class education, research and management institutions - a direct result of investment in self-
reliance in science and technology. In addition to establishing Indian Institutes of Technology
(IITs) in various cities around India to create a large pool of technical skills, the government has a
computer policy to encourage R&D in personal computers. The IT training sector continues to
grow at a rapid rate: total training revenues in 1998 were estimated at US $ 225 Million, 30
percent up from the previous year. However, one of the biggest challenges to the Indian software
industry remains the difficulty in attracting and retaining talented professionals.

 Content & Applications: India has a large population with great linguistic diversity. Creating
and maintaining locally relevant content for a country with 418 languages is a challenge.
Nevertheless, local language content is slowly making ICT more relevant and accessible to a
broader cross-section of the population. For example, India's Center for Development of
Advanced Computing has recently launched a scheme called iLEAP-ISP to create a free
multilingual word processor to be made available to all Internet subscribers. On other fronts,
some states such as Tamil Nadu have launched their own initiatives to support the
standardization of local language software through interface programs that can be adapted to
word processors, dictionaries, and commercial keyboards for use in schools, colleges,
government offices and homes.

An emphasis has also been placed on the development of relevant e-government applications in
India. Some states such as Madhya Pradesh and Andhra Pradesh have started to introduce
applications which allow citizens to have faster and more transparent access to government
services, for example, the provision of information on laws and regulations, and the procuring of
licenses and official documents online.

Strategic Compact: Public-private partnerships, catalyzed by the IT Ministry, have played a key
role in India's ICT related development. One of the positive results of this effort has been the IT
Act of 2000, which was based on the recommendation of the National IT

Task Force, and aims to set the overall strategy for the IT sector. In addition, the government
and the private sector are starting to come together to foster ICT development. For example, a
joint effort by the Computer Science Automation Department at the Indian Institute of Science and
a Bangalore-based private company have developed Simputer - a cheap micro-computer that
enables illiterate users to browse the Internet.

India's development and contribution in world's information technology sector is of highest

reputation. Cities like Bangalore have become the favorite (most preferred) destinations of all the
big banners like HSBC, Dell, Microsoft, GE, Hewlett Packard, and several Indian multinational
firms like Infosys Technologies, Wipro and Microland, who have set-up their offices in the city. It
is because the city offers good infrastructure, with large floor space and great telecom facilities.
This can be judged on the basis of the high growth statistics of India and the changing outlook of
the companies towards India.

It is because of this growth that many popular brands that have not yet build up there stable
offices in the country are making it fast to have a destination in India too. For example, Sun
Microsystems, a global IT major, announced in Bangalore to double the present workforce of the
company's Sun India Engineering Center (IEC) from the present 1000 to 2000 in the next two
years time. IEC, which is the largest R&D center for Sun outside the US, would also focus on
developing products in India to suit the needs of the Indian market, which would be benchmarked
globally.

This speedy growth of IT sector is undoubtedly due to the efforts of Indian government and the
other developments that took place in the other parts of the globe.

The country has seen an era when after the IBM shut-down its shop in India in 1950, the
mainframes that were imported into the country were all from Russia. Western computers could
not be imported because of an American embargo on export of high-technology equipment to
India, which was considered an ally of the Soviet Union. Slowly, with time, the country could
develop its first powerful parallel computer in 1991 known as CDAC, by connecting together a
string of less powerful computers.

With time and the continuous growth across the world, the country continued struggling and came
up as the world leader in Information Technology Sector. The industry has grown up to US $ 5.7
Billion (including over $ 4 Billion worth of software exports) in 1999-2000, with the
 annual growth rate not sliding below 50 percent since 1991. India exports software and services
to nearly 95 countries around the world. The share of North America (U.S. & Canada) in India's
software exports is about 61 percent.

The Indian labor is not only cheap but is technically skilled too to the world-class level. It is due to
the Indian Education System that includes in its course curriculum the practical knowledge of the
latest technology that is developed in world along with the fluency in English Language that
imparts compatibility in an Indian technician to communicate and work throughout the world.

Further, the geographical location of India serves to its advantage of being exactly halfway round
the world from the US west coast, which is another reason why India is preferred destination of
many big brands.

Also, the presence of a large number of Indians, especially engineers, in the US gave India an
easy entry into the US software market.

What adds more to the dominance of India in Information Technology Sector is the government

policies, like the enactment of cyber laws to protect and safeguard the interest of software
companies in India.

Setting up of the Software Technology Parks of India (STPI), by the Ministry of Information
Technology, Government of India, and the International Technology Park in a joint project by the
State Government, the TATA Group and the Singapore Consortium to promote and facilitate the
software exports is another major step towards the growth of Indian Information Technology
Sector.

Similarly, an industrial park, known as Electronic City, set-up in 1991 takes more than a hundred
electronic industries including Motorola, Infosys, Siemens, ITI and Wipro, in an area of around
330 acres.

The Export Promotion Industrial Park, built near International Technology Park, gives an
exclusive 288 acres of area for export-oriented business. GE has its India Technology Center
located at this park and employs hundreds of multi-disciplinary technology development activities.

The other promotional activities that brought up India to this position include the IT Corridor
Project. Conceptualized by Singapore's Jurong Town Corporation Private Ltd., the IT Corridor
Project was initiated by the Department of IT and the Bangalore Development Authority in order
to develop state-of-the-art facilities for the development of knowledge based industries.

Thoughts of Some of the World's IT Leaders about India

"Economic growth will force better governance, and better governance will feed more economic
growth."
- SV, NYC, USA

"The people and communities at large feel that they don't have the ability to make a difference."
- Juzar Singh Sangha, Bedford

"India has to take more care of the village population who are still struggling to live properly."
- John Karondukadavil, India, Living in Poland, Jaslo
"India can become a superpower if she concentrates on the technology market niche."
- Devyani Prabhat, Jersey City, USA

"India must counter its skills and wage crisis."

- Pallavi, Sydney, Australia

"Hopefully, India will lead the world towards a more humane and tolerant future."
- Nilesh, Antwerp, Belgium

"India needs to take strong and clear-cut decisions to emerge as a global player."
- Nivedita Nadkarni, Madison, USA

"India is a country gaining economic ground in the world."

- Justin, Bristol, UK

"Indians now have to develop a sense of national pride."

- Leila, USA

"India will never be a super-power, much less a global power."

- Jonathan, Boston, USA

"India has had a sharp increase in the estimated number of HIV infections."
- Sezai, Eskisehir, Turkey

"India's economic success is built on the sacrifices of previous generations."

- Shekhar Scindia, Edison, NJ, USA

"While India's economic growth is encouraging, its sustainability is doubtful."

- Sigismond Wilson, Sierra Leonean in Michigan, USA

Conclusion

India is a perfect solution for all those companies, which seek cheap, yet technically-skilled labor
who have innovative minds and state-of-the-art infrastructure to work over a project, and the
ample facilities provided in perfect working conditions. For the rest, cyber laws are there to
monitor and safeguard everyone's interests related to IT sector.

All these reasons contribute to make India the most adored destination for many companies. So,
we can conclude: -

 India is poised for an explosive growth in ICT;

 India is emerging as a global R&D hub;

 India will witness changes from brain-drain to brain-gain;

 Millions of jobs will be created in ICT and other emerging technology areas;

 Quality issues will have to be addressed;

 Private world-class institutions will emerge with global collaborations;

 India will reclaim its ancient heritage of the world's most-advanced knowledge-based
civilization called "Bharat".

India will become warehouse of IT in the world.